FORMAT Ltd.

The chief accountant of FORMAT LTD has extracted the following the trial balance from the ledger as at
31 March 20X2:
BDT('000)
Issued ordinary shares of BDT 1 800
10% irredeemable non-cumulative preference shares of BDT 1 each 200
Trade Receivables & trade payables 1,820 1,866
Bank 80
Inventories at 1.1.X2 1,950
6% debentures 1,000
Sales 9,500
Rental income 200
Debenture interest ( six months to 30.6.X2) 30
Administrative and general expenses, excluding salaries 650
Administrative salaries 275
Distribution expenses 616
Purchases 5,125
Salaries associated with manufacture of goods 300
Carriage inwards 100
Property Costs 300
Revaluation Reserve 730
Retained Earnings 1,100
Freehold land, at valuation 2,850
Fixtures and fittings, at cost 2,000
Accumulated depreciation,Fixtures and fittings 900
Allowance for irrecoverable debts 100
Goodwill 300
16,396 16,396

The following items have yet to be dealt with:

1. An inventory count has revealed the end of year inventory figure to be BDT 2,020,000.
2. The company depreciates fixtures and fittings at 20% straight line cost.
3. Freehold land is revalued every three years. A valuation has just been carried out, showing that it has
risen in value by BDT 300,000.
4. An impairment review has shown that 10% should be written off goodwill. The charge should be to
administrative expenses.
5. The credit controller has said that a debt of BDT 15,000 should be written off as irrecoverable, and
the allowance for receivables should be increased to BDT 200,000.
6. The tax charge on profits for the year is estimated at BDT 750,000.
7. The allocation of expenditure between cost of sales , distribution costs and administrative expenses
should be as follows.
Distribution Administrative
% %
Property Cost 25 75
Depreciation 50 50
8. No dividends were paid or declared.
9. The debentures are repayable in full in ten years time. Interest is paid in two equal instalments per
annum.
Requirement
Prepare and present an income statement for FORMAT Ltd for the year ended 31 December 20X2 and a
balance sheet as at that date.
 FORMAT Ltd.
Income Statement for the year ended 31 December 20X2
BDT ('000)
Revenue 9,500
Less: Cost of sales (W-1) (5,455)
Gross profit 4,045
Other operating income 200
Distribution costs (W-1) (891)
Administrative expenses (W-1) (1,495)
Profit / (loss) from operations 1,859
Finance Costs (60)
Profit / (loss) before tax 1,799
Income tax expense (750)
Profit / (loss) for the year 1,049
 CL9BD Ltd.
Statement of Financial Position at 31 March 20X2
BDT ('000)
Assets
Non-current assets
Property, Plant and Equipment (W-3) 3,850
Goodwill 270
4,120
Current Assets
Inventories 2020
Trade and other receivables (1805-200 allowance) 1605
Cash and cash equivalents 80
3,705
Total Assets 7,825

Equity and Liabilities

Capital and reserves
Issued ordinary shares of BDT 1 800
10% irredeemable non-cumulative preference shares of BDT 1 each 200
Revaluation Reserve 1,030
Retained Earnings 2,149
Equity 4,179

Non-current Liabitities
Long- term borrowings: 6% debentures 1,000

Current Liabilities
Trade payables 1,896
Tax payables 750
2,646
7,825
Workings
1. Allocation of expenses

Distribution Administrati
Cost of sales
costs ve expenses
BDT('000)
Opening Inventories 1,950
Administrative expenses 1,220
Salaries 300 275
Distribution costs 891
Purchases 5,125
Carriage inwards 100
Closing Inventories (2,020)
5,455 891 1,495

2. Retained earnings
BDT
Opening 1,100
Profit for the year( From Income statement) 1,049
2,149
3. Property, Plant and Equipment
Freehold Land Fixtures and Total
fixtures

BDT
Cost / Valuation
At 1.1.X2 2,850 2,000 4,850
Additions - - -
Revaluation 300 - 300
Disposals -
At 31.12.X2 3,150 2,000 5,150

Accumulated Depreciation
At 1.1.X2 - 900 900
Charge for the year (BDT 2,000*20%) - 400 400
Revaluation - - -
Disposals -
At 31.12.X2 - 1,300 1,300

Carrying Amount
At 1.1.X2 2,850 1,100 3,950
At 31.12.X2 3,150 700 3,850